China’s efforts to shore up the volatile stock market are coming into question after stocks tumbled 8.5 percent on Monday, the biggest one-day drop in more than eight years.
The sell-off wiped out hundreds of billions of dollars of market value, mostly during a hectic last two hours of trading, according to the Wall Street Journal.
More than two-thirds of the 1,114 companies in the Shanghai benchmark index fell by the 10 percent daily maximum allowed under local market rules.
The smaller Shenzhen market fell 7 percent, bringing its losses to 31 percent since it hit a record high in mid-June.
Traders and analysts listed several reasons for the sudden slide, which came amid relatively thin trading volumes.
Some cited fears about the effect of an unwinding of heavy borrowing that investors have used to buy shares.
Others pointed to concern that the government could soon pull back on its recent attempts to underpin the market.
A spokesman for China’s top securities regulator tried to allay some of these concerns, saying the government will step up its purchases of stocks.
Zhang Xiaojun, spokesman at the China Securities Regulatory Commission (CSRC), said the CSRC-owned company that has been buying up battered shares didn’t “exit” the market.
Zhang said the company, called China Securities Finance Corp., will “increase its holdings” of stocks “at appropriate times” and will continue to fulfill its role in “stabilizing the market.”
Monday’s big decline shows investors have become skeptical of the market and of the government’s ability to control it.
China’s stock market has a history of volatility and government-engineered bull markets have sometimes ended with spectacular sell-offs that left stocks languishing for years.
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